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Topic 1: What is a Business?

  • Business: A business is a system that take sinputs, puts then through processes to generate output

  • Inputs: The raw resources (i.e. physical, financial, and human resources) that a system/organizations put through processes to generate output.

  • Processes: Steps the business uses to turn inputs into outputs, it is the 4 main business functions (i.e. HRM, Marketing, Operations, Finance & Accounting)

  • Outputs: The final product the business then sells to generate profit, this can be divided into goods and services

  • Economy: A system for producing, providing, and distributing good and services among a group of people

  • Primary sector: Extraction of raw materials

  • Secondary sector: manufacturing and processing to turn into products for sale

  • Tertiary sector: Business that provides services

  • Quaternary sector: Focuses on the acquisition and distribution of knowledge

  • Integrated businesses: business that operate in more than 1 sector

  • A business has a good chance of success when there's a good: collaboration, marketing, funds, and operations

  • Entrepreneur: individuals willing to take risks and start a business. Entrepreneur’s typically:

  • Understand communities and their problems

  • Design and plan solutions

  • Take action

  • Share and grow action to create an impact

  • Vision & mission:

  • Vision: Ideal future goal/ long term aspirations

  • Mission: Declaration of the organization's overall purpose

  • Strategy: Plans of actions the business uses to achieve their targets

  • Tactics: Short term plans used by firm to meet objectives

  • CSR: conscious consideration of ethical and environmental practices relating to business activity. Ut is how a business can benefit the wider community

  • Value & objectives: Something that helps direct, measures, guides, controls, and motivates the business

  • Common objectives: Growth, profit, ethical objectives, protecting shareholder values

  • Economies of scale: Cost reducing benefits enjoyed by firms that increases as output reaches its optimum point due to greater efficiency

  • Internal economies of scale:

  • Technical economies: Investment in equipment

  • Financial economies: The ability to take out loans with lower cost of borrowing

  • Managerial economies: Managers work is more spread out (usually for specialists)

  • Specialization economies: Skilled labor/ labor task for a specific job

  • Marketing economies: Lower cost of ad campaigns and marketing spread over larger quantity of output

  • Purchasing economies: The ability to buy in bulk or pay at a later date for inputs

  • Risk bearing economies: Spreading risks to offset unfavorable trading and spread fixed cost

  • External economies of scale:

  • Technological progress

  • Improved transportation networks

  • Abundant skilled labor

  • Regional specialization

  • Diseconomies of scale: when economies of scale reach their tipping point and operations become too large to be efficient, resulting in increasing cost.

  • Internal diseconomies of scale:

  • Lack of control and coordination

  • Poor working relationships

  • Lower productivity outsourcing

  • Complacency

  • External diseconomies of scale:

  • Higher rent

  • Local market conditions

  • STEEPLE factors

  • Traffic congestion

  • Internal growth: When a business grows via their own capabilities and resources to increase either scale of operations & sales revenue.

  • Methods of internal growth:

  • Changing prices

  • Effective promotions

  • Product innovation

  • Increased distribution

  • Preferential credit

  • Capital expenditure

  • Staff training & development

  • Providing more value for money

  • External growth: Growth that occurs by dealing with outside organizations/relations with other firms

  • Methods of external growth:

  • Merger: New company with its own legal identity

  • Acquisition: Company buys a controlling interest with agreement

  • Takeover: Company forcefully takes over company’s controlling shares without prior agreement

  • Joint ventures: Hold onto their distinct identities to form a new distinct project

  • Measuring the size of a business can be done by:

  • Market share

  • Size of workforce

  • Total sales revenue

  • Profits

  • Capital employed

  • Stakeholder: An individual or group that is affected or affects an organization/ business operation

  • Internal stakeholder:

  • Managers & directors: oversee daily operations, profit maximization

  • Employee: pay & financial benefit, working conditions, job progression

  • Shareholders: group with voting rights, optimize dividends, achieve capital gain in shares

  • External stakeholder:

  • Consumer/customer: needs/demands products and brings revenue

  • Suppliers: cooking for good work relationships

  • Pressure groups: individuals with common interests seeking change

  • Competitors: Business rivals that try to beat each other

  • Investors/financiers: provides funds for interests

  • Stakeholder conflict: Occurs when an organization fails to meet stakeholder objectives due to differences in stakeholder values.


Topic 1.5: Types of Businesses

  • Private sector: firms owned and controlled by private individuals, decisions are made by owners with little government involvement (businesses vary in size)

  • Public sector: often created, owned, and controlled by the government. They provide essential goods & services which are underprovided or inaccessible to members of society. They are funded through taxes

  • For-profit commercial enterprises:

  • Sole traders: Individuals who run a business alone with little distinctions between individuals and their business.

  • Typically small business

  • All profits go to sole trader

  • Easy to set up

  • Private financial record

  • High workload

  • Unlimited liability

  • Limited finance

  • Partnership: Businesses started by two or more individuals. Partnerships are governed by partnership agreements which may include splitting profits & losses, control, etc.

  • Greater financial access

  • Shared responsibility

  • Unlimited liability

  • Disagreements

  • Longer decision making

  • LLC/Companies/Corporations:

  • Private limited company: Privately owned by family or/and friend as shareholders (shares not sold to the public or traded)

  • Limited control

  • Greater financial access

  • Limited liability

  • Private finances

  • No external experts

  • Expensive & time consuming set up

  • No traded shares

  • Public limited company: Incorporated business that allows the general public to buy and sell shares in the company via stock exchange.

  • Greater financial access

  • Risk sharing

  • Limited liability

  • High set up cost

  • Loss of control

  • Shared profits

  • Public accounts & records

  • Requires certificate of incorporations

  • For profit social enterprises: Generates profit but has an environmental and social objective as its core. They are not judged by multi-stakeholder impact.

  • Private sector: Produces the goods and services typically salad in markets and profits and used to provide free/discounted products.

  • Public sector: Provides goods and services by contacting legal/regional/governments to outsource private sector services

  • Cooperatives: Business owned by its members running the firm with a common interest. They are often part of industries.

  • NGO/ Non-profit social enterprise: No surplus is kept, generates income by grants & donors

  • STEEPLE: Sociocultural, Technological, Economical, Environmental, Political, Legal, Ethical.

  • Ansoff Matrix: Market penetration, Product development, Market development, Diversification.


Topic 2: HRM (Human Resource Management)

  • HRM: Management function of deploying and developing people within an organization to meet business objectives. It’s responsible for workforce recruitment, management, training, and retention.

  • HR planning: Process of meeting and anticipating future staffing needs

  • HR activities: Gathering and analyzing data about organizational needs and develop responses to needs identified.

  • Recruitment

  • Retention

  • Training & Development

  • Appraisal

  • Dismissal

  • Redundancies

  • Internal factors of HRM:

  • Structure of firm

  • Size of firm

  • Budget

  • Promotion

  • Flexitime

  • Motivation

  • External factor of HRM:

  • STEEPLE factors

  • Labor mobility

  • Temporary work (gig economy)

  • Immigration

  • Reasons to resist change:

  • Self interest

  • Misinformation

  • Low tolerance

  • Interpretation

  • Overcoming resistance

  • Participation

  • Planning

  • Communication

  • Negotiation

  • Manipulation

  • Coercion

  • Workforce: Refers to the number of employees at any point in time for a particular organization. It is often used to measure the size of a business.

  • Redeployment: Means transferring a staff member from a department or branch that no longer requires his/her services to other areas of the business where a vacancy exists.

  • Organizational Structure:

  • Delegation: The passing of control and decision making authority usually through higher to lower staff.

  • Span of Control: Number of subordinates that managers/supervisors directly supervise

  • Narrow span of control: More layers, less employees under manager

  • Wide span of control: More employees under each manager

  • Chain of command: Formal line of command which orders are passed down in an organization

  • Hierarchy: Ranking of people in an organization based on their status and authority.

  • Tall (vertical)

  • Flat (horizontal)

  • Bureaucracy: Execution of tasks that are governed by official administration and formal roles in a firm.

  • Centralization: Only a few individuals at the top of the hierarchy makes decisions

  • Decentralization: Relies on diff teams to achieve goals (more delegated)

  • Delayering: Reducing layers in a hierarchy shortening chain of command.

  • Matrix structure: Where team members report to multiple managers

  • Organizational charts:

  • Flat structure: Fewer layers, short chain of command and wide span of control

  • Tall structure: Many levels of authority with little to no delegation (usually for specialized labor)

  • By product: Organized dept & decisions based on products

  • By function: Divided into functional areas (the 4 business functions)

  • By region: functions by region (MNC usually)

  • Leadership: Is the skill of getting things done through other people by inspiring, influencing and invigorating them.

  • Leadership styles:

  • Autocratic: Refers to leaders who adopt an authoritarian approach by making all the decisions rather than delegating any authority to their subordinates. It is a domineering and possibly tyrannical approach, strong and rule oriented.

  • Paternalistic: Organizational interest and employees are treated like family, guiding them through a consultation process and acting in the perceived best interest of their subordinates. The leader makes decisions on behalf of the team, building trust and loyalty in the process.

  • Laissez-Faire: Is based on having minimal direct input in the work of employees. Instead, they allow subordinates to make their own decisions and to complete tasks in their own way.

  • Democratic: Refers to leaders who take into account the views of others when making decisions. This participative leadership style means that decision-making is decentralized. This means it values inclusiveness and employee inputs.

  • Situational: Leadership style that adapts to different situations.

  • Organizational Restructuring: Change sometimes is needed for a firm to remain competitive in a changing environment

  • Incorporate new jobs and eliminate redundancies

  • Incorporate new technology

  • Concentrate on key operations

  • Motivation: Refers to the inner desire or passion to do something. The driving forces could be intrinsic (e.g. to have a sense of achievement) or extrinsic (e.g. due to financial rewards).

  • Productivity: Measures the level of output per worker. It is an indicator of motivation as employees tend to be more productive with increased levels of motivation.

  • Motivation theories:

  • Taylors: Assumes that employees are mainly motivated by money. Productivity can be improved by setting output/efficiency targets (PRP = rewards based on task completed)

  • Maslows: Physiological needs of workers must be met. The hierarchy goes: Self actualization, esteem, love & belonging, safety, physiological needs.

  • Herzberg's two-factor theory: Hygiene are basic needs of the employees that should be fulfilled while motivation is the psychological needs.

  • Rewards:

  • Financial rewards:

  • Wage: Normal time-based or PRP

  • Commission

  • Performance related pay

  • Salary: set amount paid a year

  • Fringe payment: Extra compensation (healthcare, etc)

  • Employee share ownership: Employee owns part of the business (usually for managers and directors)

  • Profit related pay

  • Remuneration: The overall package of pay and benefits offered to an employee.

  • Non-financial rewards:

  • Job enrichment: Does more complex and engaging work

  • Job rotation: Workers are given different tasks, but of the same level of complexity.

  • Job enlargement: Increasing the number of tasks that an employee performs, thereby reducing or eliminating the monotony of repetitive tasks.

  • Empowerment

  • Purpose: Finds meaning in work

  • Teamwork

  • Training:

  • Off-the-job training: Training conducted off the workplace

  • Lectures & conferences

  • Vestibule training: Prototype environment

  • Simulators: Specialized environment

  • On-the-job training: Training done while at the workplace

  • Induction

  • Coashing: supervision

  • Mentoring: Paired with more experienced workers

  • Job rotation: Different positions for new skills

  • Apprenticeship: Supervision with an expert for periods

  • In-house courses: Own training courses for staff

  • Communication: The transfer of information from one party to another. Channels of communication refers to methods through which communication takes place.

  • Teleworking: Is a method of workforce planning whereby employees work in a location away from the workplace.

  • Off-shoring: Is an extension of outsourcing that involves relocating business activitie and processes abroad. It is possible to offshore work but not to outsource it, although the practice is dominated by offshore outsourcing.

  • Outsourcing: Refers to the practice of using external providers for certain non-core business activities. These firms are able to carry out the outsourced work for less than the business would be able to. 

  • Formal communication: Communication that follows defined channels of communication. It follows an organized and developed chain of command.

  • Verbal communication

  • Written communication

  • Electronic communication

  • Pathways of communication

  • Vertical communication: Manager to employees and vice versa

  • Horizontal/lateral communication: Communication between employees of the same level

  • Informal communication: Unofficial, unstructured, communication that exists among members of an organization.

  • Single strand chain

  • Cluster chain

  • Probability chain

  • Gossip chain

  • Barriers of communication:

  • Cost

  • Tech breakdowns

  • Fear of tech

  • Jargon

  • Internal politics

  • Location & distance

  • Culture


Topic 3: Finance & Accounting

  • Finance & Accounting: Management of a business's financial resources to achieve the firm’s goals.

  • Capital expenditure: Finance spent on fixed assets/ non-current assets used repeatedly in the long term to generate revenue.

  • Revenue expenditure: Finance spent on the daily running of the business

  • Sources of financeL Where or how the business obtains resources such as funds to continue or grow business operations.

  • Internal sources of finance:

  • Personal funds

  • Retained profits: Is the value of surplus that the business keeps to use within the business after paying corporate taxes on its profits to the government and dividends to its shareholders.

  • Sale of assets: Sale of unused assets

  • External sources of finance:

  • Share capital: Is the money raised from selling shares in a limited liability company, from its IPO and any subsequent share issues.

  • Loan capital: Refers to medium- to long-term sources of interest-bearing finance obtained from commercial lenders, e.g. mortgages, debentures and business development loans.

  • Overdrafts: Allow a business to spend in excess of the amount in its bank account, up to a predetermined limit. They are the most flexible form of borrowing for unexpected cash outflows.

  • Trade credit: Allows a business to received purchased goods and pay at a later date

  • Crowdfunding: Finance of an asset over a contracted period of time

  • Leasing: Renting from lessee from lessor on an asset over a contracted period of time. The lessee pays rental income to hire assets from the lessor, who is the legal owner of the assets.

  • Microfinance: Financial service for small businesses. It enables small entrepreneurs to gain financial access to lessen poverty.

  • Business angels: Extremely wealthy individuals who chose to invest their money in businesses that show high potential

  • Cost: Refers to the sum of money incurred by a business in the production process.

  • Fixed costs: Cost of production a firm has to pay regardless of output.

  • Variable cost: Cost that changes with level of output

  • Start up cost: Initial cost of starting a business

  • Indirect/Overhead costs: Costs that do not directly link into the production or sale of a specific product.

  • Direct cost: Costs that can be traced back to the output

  • Revenue: Is the money that a business collects from the sale of its goods and services.

  • Revenue stream: Money coming into a business through its various business activities.

  • Break even point: level of output of the business that generates neither profit or loss

  • Margin of Safety: Amount in which demand for a product exceeds the BEP

  • Profitability Ratios: Examines profit when compared to other figures

  • Liquidity Ratios: Look at the ability of a firm to pay its short-term liabilities, such as by comparing working capital to short-term debts.

  • GPM (Gross profit margin): Shows the percentage of gross profit that turns into revenue. It is the ratio between profit & revenue, how much money is left to pay indirect (overhead) costs. It shows the value of gross profit as a percentage of the sales revenue.

  • NPM (Net profit margin): Shows the percentage of sales revenue that turns into profit. Analyzes the profitability of the firm as a percentage after all costs are paid.

  • ROCE (Return on capital employed): Is an efficiency ratio measuring the profit of a business in relation to its size as measured by capital employed. Measures how much money is generated from profit compared to capital invested into the fund. A higher ROCE means the more efficient the business is at generating profit.

  • Liquidity ratios: It appraises the company’s ability to pay its short term liabilities.

  • Cash flow/ Working capital: Movement of money in and out of an organization, it is the liquid cash available for the daily running of the business.

  • Investment: Refers to the purchase of assets with the potential to yield future benefits.

  • Payback period (PBP): Is an investment appraisal technique that calculates the length of time needed to earn back the initial expenditure of an investment project.

  • Average rate of return (ARR): Calculates the average annual profit of an investment project, expressed as a percentage of the initial sum of money invested.

  • Depreciation: Is the fall in the value of fixed assets over time, from wear and tear or obsolescence.

  • Window dressing: Refers to the legal act of creative accounting by manipulating financial data to make the results look more flattering.